Better feeling permeates market

A MUCH better feeling permeated the London stock market yesterday, with equities quietly building on the recovery over the previous two trading sessions.

The improvement in sentiment in equities came in the wake of renewed strength in gilts, which made further modest progress yesterday along with US Treasury bonds and German bunds.

GilIs ended with gains ranging from four to seven ticks, and never looked under any pressure. And with the US market rallying to hit yet another intra-day record, after a rather indifferent opening, there were few alarms for British stocks.

The only problem for London, according to dealers, was the lack of a really bullish domestic story.

"The top story in Europe came from Paris where the proposed Axa/UAP merger was the inspiration for some fevered activity we need some of the same over here," said a top sales trader.

The big French insurance merger story did provoke interest in insurance stocks, one of the areas seen as ripe for more mergers and acquisitions. Good figures from General Accident, the first composite to report, also helped the sector, which provided three of the top 10 performers in the FTSE 100 index.

Marketmakers bemoaned what they saw as a lack of real investment activity but generally adopted a slightly more bullish attitude. "There was an increase in genuine customer buying interest today, but it felt as if the support reflected the availability of stock rather than an aggressive buying stance," said one marketmaker.

But they all agreed the forthcoming British and US economic news would be crucial; "the last thing this market needs is for bad news on earnings and inflation in Britain and the same on inflation and retail sales in the US," said a marketmaker.

News that the Nationwide Building Society had hoisted its lending rates by 0.25 per cent, was interpreted as signalling the end of the mortgage price war between the building societies and the publicly quoted lenders, such as Abbey National and Lloyds TSB.

Turnover at the 6 p.m. count was 659.3 million shares, with non-FTSE 100 stocks accounting for just over 55 per cent of the total. Customer business on Monday, which was severely curtailed by the closure of the Paris and Brussels markets and by the limited turnover from the US, fell to a lowly £824.6 million.